An installment sale agreement with the Internal Revenue Service (IRS) refers to a payment plan that allows taxpayers to pay their tax debt in installments over time. This type of agreement can be beneficial for individuals and businesses who are unable to pay their full tax liability at once but want to avoid IRS enforcement actions such as garnishment, levies, and seizures.
To qualify for an installment sale agreement, taxpayers must meet certain requirements, including filing all required tax returns and owing $50,000 or less in combined tax, penalties, and interest. Additionally, the IRS will consider the taxpayer’s ability to pay their debt based on their income, expenses, and assets.
One advantage of an installment sale agreement is that it can help individuals and businesses avoid damaging their credit scores. For example, if a taxpayer fails to pay their taxes and the IRS files a tax lien, it can negatively affect their credit rating and make it difficult to obtain credit.
To apply for an installment sale agreement, taxpayers must complete Form 9465, Installment Agreement Request, and provide detailed information about their financial situation. They may also be required to make an initial payment and agree to certain terms and conditions, such as filing their tax returns on time and paying any future taxes owed in a timely manner.
It is important to note that installment sale agreements with the IRS may come with interest and penalties. Taxpayers should also keep in mind that if they default on their agreement, the IRS may take further enforcement actions.
Overall, an installment sale agreement with the IRS can be a helpful option for individuals and businesses who are struggling to pay their tax debts. Those considering this option should consult with a tax professional to determine if it is the best course of action for their situation.